When the Federal Reserve began paying interest on excess reserves,the effect on monetary policy was

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By beginning to pay interest on excess reserves, the Federal Reserve added a new tool to monetary policy. This allowed them to potentially influence the banking sector's behavior by adjusting the interest rate on excess reserves. However, this move may have also made open market operations less effective as a tool for controlling the money supply. It did not eliminate the need for the Federal Funds Market, and it may have had some impact on the relationship between reserve requirements and monetary policy, but this effect would likely be secondary to the introduction of a new policy tool.

When the Federal Reserve Began Paying Interest on Excess Reserves,the